In good times, executives wax lyrical about what their companies might become. In tougher times, they tend to focus on what they are. Oz Minerals is a desperately indebted Australian miner, kept from the clutches of administration by a series of payment extensions from a syndicate of lenders. Before it lie three proposals. The first is a deal agreed in April to sell $1.2bn of assets to Minmetals, China's largest metals trader. The other two, presented late last week, involve recapitalisations through debt and equity.
Barry Cusack has copped a lot of flak for continuing to recommend the Minmetals deal, and refusing to entertain the alternatives. But the Oz Minerals chairman is doing the right thing. Oz's annual meeting is this week; the latest deadline from the banks for repayment of about $800m of debt is the end of the month. This is no time to ask Minmetals to break a “no talk, no shop” agreement.
Oz claims that the last-minute recapitalisation proposals – one from the corporate finance firm RFC in tandem with Royal Bank of Canada, the other believed to be from Macquarie – are inferior. They may be. But at this point questions of value are almost irrelevant. Input a different copper price or exchange rate, and assessments of a recapitalised Oz versus the new Oz, stripped of all its assets bar the politically sensitive Prominent Hill mine, vary wildly. It certainly seems as though Minmetals would be getting a good deal: the assets are going for a $400m discount to book value. But what it represents is certainty of execution.